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MIssed RMDs on inherited 403B

Forum|Forum|2 years ago
March 1, 2024
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In March 2020 we inherited a Fidelity 403B from my father. but it now appears we did not handle it properly. I've done some research, so can you please confirm the correct way to straighten out my situation?

My understanding is that in 2020 RMDs were suspended due to Covid (so we happily ignored the situation).

I also thought (incorrectly) that the rules said I had up to 10 years to take the funds, scheduled at my discretion. But it has very recently come to my attention that since my father died in Dec of 2019, there were different rules in effect, and yearly RMDs should have started the following year.

Therefore it looks like I missed the RMDs for 2021, 2022 and 2023. (2020 being suspended due to COVID)

Please comment If this is the correct course of action:

Request the RMDs for 2021, 2022 and 2023 from Fidelity.
File Form 5329 with my 2023 return (TT desktop)
Include a mailed letter of explanation to see if they will waive the penalty (any chance if its been 3 years like this ?)

When I receive the RMD funds where does the income get declared? On the 2023 return, or will it be part of 2024?

Do i have to go back and amend returns for 2021 and 2022 adding the RMD for each?

This is all news to me , so I appreciate any help

Thanks

BTW Should the plan administrator (Fidelity) have been expected to send reminders about RMDs? I had no clue and never heard a word

Best answer by dmertz

Correct, except that 2021 and 2022 Forms 5329 requesting waivers of the penalties for those years need to be filed as well. Nothing else needs to be amended on the 2021 and 2022 tax returns. The IRS has a history of granting these waivers. The only case I can imagine where the IRS would not grant the waiver is if the explanation indicates that not taking the RMD by the deadline was intentional.

The distribution of these amounts is reported on the tax return for the year in which the distribution occurs, presumably 2024.

And just to be clear (which you seem to understand now), you inherited immediately upon the death of your father. The date on which the rollover to an inherited IRA occurred is not the date that the 403(b) was inherited.

Inherited IRA custodians are not required to provide reminders and generally will not because it's possible for the RMD to be satisfied from another IRA that the beneficiary inherited from the same decedent that is subject to the same RMD requirement. Fidelity does calculate the required amount and will display the calculated amount when you initiate a distribution from the inherited IRA.

D

dmertzAnswer

Employee

Correct, except that 2021 and 2022 Forms 5329 requesting waivers of the penalties for those years need to be filed as well. Nothing else needs to be amended on the 2021 and 2022 tax returns. The IRS has a history of granting these waivers. The only case I can imagine where the IRS would not grant the waiver is if the explanation indicates that not taking the RMD by the deadline was intentional.

The distribution of these amounts is reported on the tax return for the year in which the distribution occurs, presumably 2024.

And just to be clear (which you seem to understand now), you inherited immediately upon the death of your father. The date on which the rollover to an inherited IRA occurred is not the date that the 403(b) was inherited.

Inherited IRA custodians are not required to provide reminders and generally will not because it's possible for the RMD to be satisfied from another IRA that the beneficiary inherited from the same decedent that is subject to the same RMD requirement. Fidelity does calculate the required amount and will display the calculated amount when you initiate a distribution from the inherited IRA.

O

Opus 17

Employee

@dmertz wrote:

Correct, except that 2021 and 2022 Forms 5329 requesting waivers of the penalties for those years need to be filed as well. Nothing else needs to be amended on the 2021 and 2022 tax returns. The IRS has a history of granting these waivers. The only case I can imagine where the IRS would not grant the waiver is if the explanation indicates that not taking the RMD by the deadline was intentional.

Is this under different rules than inherited IRAs where the RMD requirement is suspended?